4 Energy Stocks With Attractive Dividends To Power Up Your Portfolio

Investor activity in the energy sector has started showing signs of improvement in 2024 following traders' positive response to rising oil prices. The S&P 500 Energy Sector has delivered a year-to-date return of 7.24% (through August 12), however, is still below the broader market S&P 500 Index of 12.04%. The performance reflects the positive outlook traders have for energy companies in the remaining months of the year. 

Energy stocks had a solid start to the year as oil and energy prices moderated following several years of weak performance. Investors continue to direct their attention primarily toward more traditional companies, including oil and natural gas. Though there has been an upward trend in the renewable energy sector, near-term opportunities in the traditional fossil fuels category remain plentiful. 

Investors remain confident that growing demand on the back of improved supply chains will help bolster company profitability. Not only this, moderating prices for fossil fuel categories outside of crude oil will help keep traders’ portfolios diversified, as more energy companies look to raise production activity in the coming years, despite renewable energy sources now making up roughly 30% of all U.S. energy production. 

Much of Wall Street continues to be locked in on technology stocks despite the recent broader market sell-off and muted gains of top U.S. technology companies. Despite the overall sentiment, the energy sector could pique investor’s interest in the coming months, as better performance against the backdrop of rising demand and growing sector activity bolsters profitability and distributions.

Devon Energy Corporation 

Oklahoma-based energy producer, Devon Energy (NYSE: DVN) announced second-quarter earnings on the heels of the market sale triggered on August 5. Despite the hiatus, Devon Energy surprised investors after announcing record second-quarter production with the company delivering 335,000 barrels per day, surpassing the company’s three percent guidance. 

Improved production provided the company with a much-needed boost in cash balances, which reached $1.2 billion for the recorded period. For the period, Devon Energy declared $844 million in net earnings or $1.34 per diluted share. Second quarter cash flow remained on the strong side, with an operating cash flow of $1.5 billion and free cash flow of $587 million. 

The strong second-quarter results managed to give the company enough motivation to raise their forward-looking production outlook. This would be the second consecutive quarter that Devon Energy had raised its full-year 2024 production outlook. 

Devon Energy provides dividend-hungry investors with a large upside potential. For the second quarter, the company declared a fixed-plus-variable dividend of $0.44 per share. The current distribution represents a 3.93% dividend yield, with DVN trading at a price-to-earnings ratio (P/E) of 8.21. 

On top of this, in the second quarter, the company repurchased 5.2 million shares and has since 2021 repurchased 54.7 million shares at a cost of $2.7 billion. As of Q2, the company has declared to increase share-repurchasing by 67 to $5 billion which will take place over the coming years. 

Investors are likely to benefit from the company’s modest dividend yield, and relatively strong performance, with share prices down a meager 1.29% year-to-date. Not only this, but share repurchasing activity remains a key activity for the company, meaning that investors will not only benefit from distributions but potentially from ongoing share buybacks. 

Keyera Corporation 

Keyera Corp (OTCMKTS: KEYUF) is a Canadian oil and gas producer, with extraction fields and refineries primarily located in Western Canadian territories. The company produces and transports various gas liquids across much of North America, including gas operations in the United States. 

The performance of energy stocks in Canada mirrored U.S. companies during the last several years as rising energy prices, coupled with strong demand and tight-roped supply chains created unfavorable trading conditions on the stock market. 

However, energy prices in Canada have started to moderate, with an average monthly cost of CAD 0.192 cents per kilowatt-hour, as of September 2023. Canadian households are now paying more for energy compared to pre-pandemic levels. The average monthly energy bill in larger cities has risen sharply, with the average utility bill in Toronto (only energy) now at $170.91 and Vancouver at $187.00 per month. 

However, these price fluctuations have provided Keyera, and other energy companies with more favorable trading conditions. For starters, Keyera reported a decline in net earnings, with Q2 earnings at $142 million, compared with $159 million in Q2 2023. Elsewhere, distributable cash flow remained positive at $202 million versus $207 million for Q2 2023. 

A key business segment - Gathering & Processing - delivered strong results, with a year-over-year increase. Total delivery for Q2 2024 came in at $102 million compared to $84 million for the same period last year. The improvements were partially driven by the impact of wildfires in the third quarter, which resulted in higher volume output in Northern gas plants. 

On top of this, Liquids Infrastructure had similar improvements, which delivered $133 million in realized margin. This is up from $119 million for the second quarter last year. Activity across their network, including higher volume output, and improved fractionation, storage, and condensate services helped to bolster financial delivery. 

Keyera continues to report sustainable dividend conditions. The company increased its dividend by 4% in Q2 2024, which was largely supported by the company’s fee-for-services business. The conservative payout ratio of 55%, as reported for Q2 2024 has helped Keyera keep distribution levels attractive to dividend-hungry investors. Keyera stocks are up 19% since the beginning of the year. 

Vitesse Energy Inc

Vitesse Energy (NYSE: VTS) allows investors to take a more diversified approach to investing in oil and gas. The company applies strategic risk management objectives which provides them with the ability to offer investors more long-term value, and active management of their existing asset base. 

The company holds assets of nearly 50,000 net acres and total interests in more than 7,000 producing wells. Last year, Vitesse managed to hedge approximately 40% of “expected oil production” with a price hedge of $78.95 per barrel. 

The ability to successfully hedge against forward-looking oil production output, while having a minority interest in producing wells helps to lower the company’s risk exposure, and enables them to partner with both large and small oil and gas operators. 

Before talking about their financials, Vitesse Energy has continued to deliver an attractive dividend, quarter-over-quarter, and since completing their spin-off in January 2023, the company has paid a cash dividend of $3.025 per share. 

During first-quarter earnings results, the company announced it would raise the quarterly dividend from $0.50 per share to $0.525 per share. The increase bolstered annualized dividend growth to roughly $2.10 and further bumped up dividend yield to 9.2% by the end of June 2024. 

As of August, dividend yield remains elevated at 8.55%, while share prices have increased by approximately 12.41% since the turn of the year. 

Overall, the company had a strong second quarter, with net income of $1-.9 million, and adjusted net income of $11.7 million. Second-quarter production output increased by 8%, with oil representing 70% of production, and 96% of total oil and gas revenue. 

For the reported quarter, total revenue, including effects of realized hedges topped $65.6 million. This reporting represented a year-over-year improvement of roughly 31%, while that of net income improved by over 11% year over year. 

Vitesse Energy leverages its position to benefit from rising demand, without having to run the risk or direct costs associated with operating extraction wells. This allows them the ability to grow bottom-line performance while hedging against possible long-term output and near-term opportunities within the sector. 

WEC Energy Group Inc

While Wall Street can’t get enough of large-cap technology stock, under-the-radar players such as WEC Energy Group (NYSE: WEC) are delivering favorable results that could help bring more traders back to the energy sector in the coming months. 

The company provides energy and natural gas services to more than 4.4 million customers across four different states. Though the company admits that the most recent winter was perhaps the warmest on record, they have continued to deliver positive results, which showed that current forward-looking strategies are playing in their favor. 

For the first six months of the year, the company posted earnings of $2.64 per share on $833.6 million in net income. Based on second quarter earnings, the company reported $211.3 million in net income or $0.67 per share. This was however a decline from the previous quarter of $289.7 million or $0.97 per share. 

Similarly, a decline in net income meant that the company also reported a slowdown in net revenue, which totaled $4.5 billion, down $265.9 million compared to the first half of last year. 

Though there has been a decline in capital structure, the company is focused on applying more strategic financial discipline in the remainder of the year, especially as summer begins to near the end, and colder temperatures are expected for the last three months of 2024. 

For the second quarter, WEC Energy delivered a dividend yield of 3.76% or $0.84 per share for Q2 2024. Some analysts have been looking at WEC Energy as a possible alternative to other Fortune 500 energy companies, seeing as WEC holds a strong record track of delivering positive earnings growth while improving base-line delivery and increased supply. 

The company further reaffirmed its 2024 earnings guidance of $4.80 to $4.90 per share, however, this is one of the assumptions that normal weather conditions will persist for the remainder of the year. 

WEC was largely unaffected by the recent broader market sell-off. While stocks fell 2.11% amid the meltdown on Wall Street, on a longer scale share performance has improved by nearly 10% in the 30 days between July 12 and August 112. On a year-to-date period, share prices are up by 2.98%, making up for previous losses, and in total, WEC is up by nearly 17% from its former bottom in February. 

Buy Now and Hold For Later 

The energy sector is steadily regaining steam as broader market conditions on the back of stabilizing oil prices help bolster investor sentiment. Though there are plenty of challenges focused on possible near-term turmoil in key oil-producing countries, the energy sector provides investors with more opportunities, especially within the midstream energy sector. 

Alternative investments such as renewable energy have been picking up momentum in recent years, however, wider application thereof will take another several years, which leaves investors with more than enough time to leverage current opportunities presented in the fossil fuel market. 

With energy prices beginning to moderate, and supply chain conditions improving, traditional energy companies are in a strong position to present investors with better upside potential on the back of wider market volatility and near-term uncertainty.